The 2014 tax season is now here, and this could be the busiest ime of year for many advisors.
Among the many challenges of tax season is that it can become too routine;
you simply follow the same process year
after year. If this describes your firm,
you are potentially missing out on efficiency opportunities for your firm and
an improved service experience for your
clients. Here is a quick list of best practices for this tax season.
A successful tax season starts with
how you communicate with your clients.
Consider writing a letter or producing
a webinar or video that covers important details. Items to highlight should
include important tax deadlines, tax-exempt (retirement) account items, 1099
information and 1099 delivery schedule. Your clients are inundated with tax
information during this time of year, so
be succinct with your communications.
A common area for confusion is which
report your client should use for reporting gains and losses: the report from your
firm, their custodian or both. Whatever
you decide (and make sure you are clear
on this decision), it is very important that
any duplicate information between the
reports is reconciled. With today’s technology, there shouldn’t be any surprises in
this area. Reconciliation of this gain/loss
data should be happening throughout the
year, and is especially critical for transactions that are considered “covered” under
the IRS cost basis reporting rules (see
“Cost Basis Reporting: The Gift That Keeps
on Giving,” Investment Advisor, December
2014). Speaking of cost basis, this is also a
good time to revisit the default accounting
methods set up on an individual account.
Perhaps one of the more frustrating
aspects of tax season is when you are
waiting for a 1099 to be delivered for a
client account, especially when the 1099s
for the same client’s other accounts are
already complete. To help ease some
of the frustration in this situation, you
should be able to work with your custodian to determine the asset or assets that
impact the delivery of the completed 1099.
Knowing the holdings that are delaying
the 1099 should also help in researching
and ultimately determining the estimated
delivery date of the 1099 report.
A common best practice that is overlooked during tax season is double-checking retirement contributions. Too
often, contributions need to be “
re-cod-ed” to reflect the proper contribution
year (2014 versus 2015), or the contribution mix between employee and
employer is miscalculated. Ideally, you
want to catch these errors early to avoid
any additional frustration or concerns.
Fire drills during tax season are hard
to avoid. It is expected that your firm will
receive a number of last-minute requests.
Given this pressure, it is important to
remind your staff of your firm’s security
policies. It is too easy for staff members
to rush responding to a request and forget
to encrypt information they are email-
ing to a client. Furthermore, you should
review with your staff the permission or
authority required to receive informa-
tion on behalf of a client. Just because
someone says, “I’m the accountant for
your client and I need some cost basis
information,” it’s not enough to release
the data. Of course your staff wants to be
helpful, but it is still important that they
closely follow your security policies.
Advisory firms that successfully
leverage technology throughout the
year continue to be an efficient firm
during tax season, too. Products like
their imaging system, portfolio reporting, CRM, website, etc., all serve important roles in helping these firms provide
excellent service and support during
tax season. In fact, these firms might
feel tax season is not much different
from any other time of year, and that is
a great overall goal for all firms.
Dan Skiles is the president of Shareholders
Service Group in San Diego. He can be reached
The Technology coach
By Dan Skiles
Tax season 2014: Your Quick List of
Firms that are efficient all year long can breeze through tax season
How Many of Your Clients Use Tax Reporting Software?
Do you know how many of your clients (and which ones) use tax reporting software like Turbo Tax? It is important to have this information because these clients
will likely create permissions in the software to electronically download their
tax reporting activity and details directly from the custodian of their accounts,
essentially bypassing any tax information that you might be sending them separately. If everything is reconciled, there shouldn’t be many problems. however,
it is important to recognize the source of the data, especially as it relates to
“uncovered”—meaning “unreported”—cost basis for positions that were acquired
prior to the IRS reporting mandate. Therefore, remember to include specific guidance for these transactions in any of your tax communication materials.